Washington is seeking to return its Kalshi case to state court, following Nevada’s playbook, but a recent Third Circuit ruling could complicate the outlook.
Washington state has moved to remand its lawsuit against Kalshi back to state court after the prediction market operator removed the case to federal court. The filing comes as courts across the U.S. continue to split on whether event contracts fall under state gambling laws or the federal framework outlined in the Commodity Exchange Act (CEA).
Washington Argues Case Is Purely State Law
In its motion, Washington argues that the case belongs in state court because it is grounded entirely in state law, rejecting Kalshi’s attempt to keep the dispute in federal jurisdiction.
The state writes that the complaint “makes no federal claims, cites no federal law, and raises no federal issues. Under the ‘well-pleaded complaint rule,’ remand to state court is therefore proper.”
Washington argues that Kalshi’s reliance on federal law, including the Commodity Exchange Act (CEA) and the Unlawful Internet Gambling Enforcement Act (UIGEA), is irrelevant at this stage. It notes that a federal defense “cannot confer federal question jurisdiction.”
The filing also challenges Kalshi’s attempt to invoke federal officer removal. It argues that Kalshi is a private entity and does not meet the requirements for federal jurisdiction under that doctrine.
The state warns that allowing removal would “disrupt the delicate federal-state balance.” It stressed that gambling regulation has historically been a matter reserved for individual states.
Washington further states that Kalshi has repeatedly attempted to move similar cases into federal court without success. It cites remand decisions in Massachusetts and Nevada, as well as a pending case in Michigan.
Original Complaint: “Illegal Gambling” Under Washington Law
The remand motion builds on Washington’s original complaint, which frames Kalshi’s platform as an unlawful gambling operation under state statutes.
The filing states that “[u]nder longstanding, well-established, and unambiguous Washington state law, Kalshi’s gambling operation is illegal.”
It further alleges that Kalshi is “openly violating Washington law, and turning a profit in the process.” The complaint also states that Kalshi advertises that it has “cracked the code on legal betting in all 50 states” for “sports markets” and “everything else.”
Washington is seeking injunctive relief, civil penalties, and disgorgement, positioning the case as both a gambling enforcement action and a consumer protection matter.
Nevada Sets the State-Court Playbook
Washington’s push mirrors a strategy that has already proven successful in Nevada.
Earlier this year, a federal judge granted Nevada’s request to remand its case against Kalshi back to state court. The court ruled in favor of Nevada, citing arguments similar to those now raised by Washington. That includes the argument that the case arises under state law and is not preempted by federal regulation.
U.S. District Judge Miranda M. Du ruled that Nevada’s lawsuit is based on Kalshi’s failure to obtain a Nevada gaming license, rather than its status as a federally regulated exchange.
Judge Du also found that the CEA does not “completely displace” state law. Furthermore, she rejected Kalshi’s argument that the Commodity Futures Trading Commission is a necessary party.
Du’s ruling allowed the Nevada Gaming Control Board to pursue a preliminary injunction, which the court later granted. That effectively blocks Kalshi from offering contracts for sports, elections, and entertainment events in the state.
Third Circuit Ruling Complicates Outlook
However, Washington’s remand filing arrives against a shifting legal backdrop.
On April 6, the U.S. Court of Appeals for the Third Circuit ruled in favor of Kalshi in its case against New Jersey regulators, affirming a preliminary injunction that blocks state enforcement.
The court found that Kalshi had shown a likelihood of success on its preemption argument. It found that the CEA grants the CFTC “exclusive jurisdiction” over certain event contracts traded on federally regulated exchanges.
The ruling adds weight to Kalshi’s core argument that its contracts are financial derivatives rather than gambling products, potentially strengthening its position in federal court.
The decision underscores a growing divide across jurisdictions. Many legal observers expect the ultimate decision to come from the U.S. Supreme Court.
The post Washington Seeks State Court Remand in Kalshi Case as Legal Split Widens appeared first on Gambling Insider.
